Thursday 22 February 2018

Fingleton loans: the golden circle

Society's €4.4bn rubberstamping binge financed casinos, hotels, golf resorts and French vineyards

Michael Fingleton
Michael Fingleton

Tom Lyons

THE top 30 borrowers from Irish Nationwide, the rogue building society which has cost the taxpayer billions, were loaned €4.4bn at the peak of the boom to bankroll everything from a private residence in Monaco to a €14m chateau and vineyard in France, a €5m house in Portugal and a casino on St James's Street in London.

A secret report circulated by Goldman Sachs, the investment bank, to prospective buyers of the society in the summer of 2007, reveals how the society went on a high-roller lending binge under its chief executive Michael Fingleton, using money from French, German and Swiss banks.

Documents circulated to prospective buyers of the society, which later required a €5.4bn taxpayer bailout, reveal how the society developed a profligate lending model that saw it align itself with developers by using so-called "supplemental arrangement fees", or profit-sharing deals to boost its value ahead of a sale.

The documents show the society made €66m from these fees in 2006, but told prospective buyers, which included Icelandic bank Landsbanki, that deals with developers would generate €750m more over time.

Irish Nationwide management also explicitly told buyers that they expected "careful consideration" to be given as to how they would be rewarded post a sale.

The documents show that in the case of Irish Nationwide, ordinary borrowers did not, as Taoiseach Enda Kenny said, "go mad borrowing", but that instead, most risky lending was concentrated around less than 100 people.

The list of the top 30 borrowers shows Ballymore Properties, whose finance director David Brophy also sat on the board of the society, was its biggest borrower.

The society loaned it hundreds of millions to fund projects in London, including a 260-residential-unit tower, a 170-bed hotel and other deals.

Galliard Homes, a large London house-builder, had seven facilities with the society worth up to €100m each, alone or in partnerships.

The London-based Landesberg and Rosenberg familys had a facility of €240m in the society relating to their 1,800-strong Admiral pubs portfolio.

Both Galliard and the Landesberg/Rosenberg families last year helped set up their principal lender in the society, Gary McCollum, in business by investing €300,000 into his property consultancy.

Clarendon Properties Ltd, Paddy McKillen's main property company, had a €61m loan mainly relating to the Powerscourt centre in Dublin and the Savoy shopping centre in Cork.

Another €14m was loaned towards his Chateau La Coste, a vineyard in France, which the world's best architects have embellished. His other loans include a €24m office in Paris, an €8m property in London and a €12m retail unit in Limerick.

The society loaned €110m to Heron International, owned by the family of Gerald Ronson, to buy four Club Med resorts in Spain, France and Italy.

Mr Ronson spent six months in prison in relation to the Guinness share trading scandal and was fined £5m in 1990.

Danny Kitchen, an ex-chairman of Irish Nationwide, was deputy chief executive of Heron from 2003 to 2008.

Niall Mellon had six facilities in 2007, including €52m to fund apartments in Swansea, €31m to build an apartment block in Birmingham, and €21m for a development site in Bristol and other loans.

Gerry Gannon has five facilities with the society, including €27m toward the purchase of the K Club, €22m towards a project in Dundrum, and €5m for a house in Portugal.

Sean Dunne, who is described by the society as a "customer for many years", was loaned €66m to purchase four blocks of AIB Bankcentre in Ballsbridge, Dublin 4, and over €20m towards a 5.4 acre site in Co Kildare. Mr Dunne borrowed €29m by way of "equity release" from one of his companies.

Anoa Developments, a property investment company owned by Bernard Costelloe, borrowed €81m to build a property and development portfolio, including €27m to buy the Oakley Court Hotel in Windsor and €24m to buy a casino at St James's St, London.

Colpy Ltd, a company owned by Cyril Dennis, was loaned vast sums to buy a private residence in Monaco, investment properties in the exclusive Cap D'Antipes area of France, a hotel in the Cote d'Azur, and sites in London and Scotland.

Tom McFeely, the former IRA hunger striker, and his partner Larry O'Mahony, were listed as having loans relating to sites in Tallaght and a "private residence".

Hugh O'Reagan, the publican, was another big client, with his biggest loan being €134m to build a golf and leisure resort in the Dublin moutains.

Other big Irish clients included the Ward/Anderson cinema-owning family; Sean Kelly, the owner of Benton Properties; Michael O'Flynn's O'Flynn Construction; Devondale, owned by the Durkans; and Pascal Conroy's Albion Properties.

British house-builders and landowners also dominated the list, including Bond & Bond Jersey, Safehaven Homes, the Gateway in Leeds and Deedchoice, a UK hotel and landowner.

Sellar Properties, owned by Irvine Sellar, a wealthy London developer who is trying to build London's tallest building was also among the society's top 30 customers.

Since the summer of 2007, some of the society's top 30 have managed to refinance or repay their loans, but the bulk of the money remains outstanding.

Goldman Sachs failed to secure a buyer for Irish Nationwide in 2007, but eight days before the government guarantee in 2008, told the government there was "real value" in the top 30 loans.

The summer 2007 documents warned, however, that the society's "overall approach" to risk assessment "would not be described as highly developed".

They claimed, however, that this was counterbalanced by its board, chaired by Michael Walsh, which had "significant involvement" in overseeing any loan more than €1m.

Sunday Indo Business

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